Coastal Financial Corporation Announces First Quarter 2024 Results
Coastal Financial reported net income of $6.8 million for Q1 2024, a decrease from the previous quarter, with ROA at 0.73% and ROE at 9.21%. The company increased assets to $3.87 billion, loans by $173.5 million, and deposits by $102.6 million. Despite higher expenses and lower net income due to unanticipated costs, Coastal remains focused on technology investments and credit standards.
Increased total assets by $111.9 million to $3.87 billion in Q1 2024.
Total loans grew by $173.5 million, with CCBX loans up by $120.3 million.
Deposits saw a $102.6 million increase in Q1 2024, predominantly from CCBX deposits.
Net income decreased in Q1 2024 due to $2.3 million in unanticipated expenses.
ROA decreased to 0.73% in Q1 2024 compared to previous quarters.
ROE also declined to 9.21% in Q1 2024, affecting shareholder returns.
First Quarter 2024 Highlights:
- Net income of
$6.8 million , or$0.50 per diluted common share, for the three months ended March 31, 2024, compared to$9.0 million , or$0.66 per diluted common share for the three months ended December 31, 2023- Return on average assets ("ROA") of
0.73% for the three months ended March 31, 2024, compared to0.97% for the three months ended December 31, 2023. - Return on average equity ("ROE") of
9.21% for the three months ended March 31, 2024 compared to12.35% for the three months ended December 31, 2023.
- Return on average assets ("ROA") of
- Net interest margin of
6.78% for the quarter ended March 31, 2024, compared to6.61% for the quarter ended December 31, 2023. - Continued investment in technology to build and enhance the BaaS infrastructure, increase automation, enhance operational efficiency and productivity requires significant upfront expense, but is necessary for long-term success.
- Decrease in net income driven by
$2.3 million in unanticipated expenses, net of income tax, (more information is provided on these expenses later in this earnings release). - Total assets increased
$111.9 million , or3.0% , to$3.87 billion for the quarter ended March 31, 2024, compared to$3.75 billion at December 31, 2023. - Total loans, net of deferred fees increased
$173.5 million , or5.7% , to$3.20 billion for the quarter ended March 31, 2024 compared to the quarter ended December 31, 2023.- Community bank loans increased
$53.1 million , or2.9% , to$1.88 billion . - CCBX loans increased
$120.3 million , or10.1% , to$1.32 billion .- Enhanced credit standards on new CCBX loan originations.
- Effective April 1, 2024, exposure was reduced from
10% to5% on the CCBX portfolio that the Company is responsible for losses on.
- Community bank loans increased
- Total of
$100.5 million CCBX loans sold during the quarter ended March 31, 2024 as management continued to sell loans as part of our strategy to reduce risk, optimize the CCBX loan portfolio and strengthen our balance sheet through enhanced credit standards. - Deposits increased
$102.6 million , or3.1% , to$3.46 billion for the quarter ended March 31, 2024.- CCBX deposit growth of
$166.2 million , or8.9% , to$2.03 billion .- CCBX deposit growth excludes the
$92.2 million in CCBX deposits that were transferred off balance sheet for increased Federal Deposit Insurance Corporation ("FDIC") insurance coverage purposes, compared to$69.4 million for the quarter ended December 31, 2023. Amounts in excess of FDIC insurance coverage are transferred, using a third party facilitator/vendor sweep product, to participating financial institutions.
- CCBX deposit growth excludes the
- Community bank deposits decreased
$63.6 million , or4.2% , to$1.43 billion .- We focus on growing and retaining less costly core deposits by not globally matching increases in rates on interest bearing deposits by our competitors and letting higher rate deposits run-off; additional exception pricing tactics were added as a strategy at the end of the first quarter of 2024 to retain and more effectively compete in the market.
- Includes noninterest bearing deposits of
$515.4 million or35.9% of total community bank deposits. - Community bank cost of deposits was
1.66% compared to1.57% for the quarter ended December 31, 2023.
- Uninsured deposits of
$495.6 million , or14.3% of total deposits as of March 31, 2024, compared to$558.6 million , or16.6% of total deposits as of December 31, 2023.
- CCBX deposit growth of
- Liquidity/Borrowings as of March 31, 2024:
- Capacity to borrow up to
$659.5 million from Federal Home Loan Bank and the Federal Reserve Bank discount window with only minimal borrowings, taken once to test the lines, under these facilities since the first quarter of 2022 and no borrowings on these lines at March 31, 2024.
- Capacity to borrow up to
- Investment Portfolio as of March 31, 2024:
- Available for sale ("AFS") investments of
$41,000 at March 31, 2024, compared to$99.5 million as of December 31, 2023,$100.0 million in AFS U.S. Treasury securities matured during the quarter ended March 31, 2024. - Held to maturity ("HTM") investments of
$50.0 million , of which100% are U.S. Agency mortgage backed securities held for CRA purposes. The market value of the HTM investments is$299,000 less than the carrying value, the weighted average remaining life is 14.6 years as of March 31, 2024 and the weighted average yield is5.46% for the quarter ended March 31, 2024.
- Available for sale ("AFS") investments of
EVERETT, Wash., April 29, 2024 (GLOBE NEWSWIRE) -- Coastal Financial Corporation (Nasdaq: CCB) (the “Company”, "Coastal", "we", "our", or "us"), the holding company for Coastal Community Bank (the “Bank”), today reported unaudited financial results for the quarter ended March 31, 2024.
Quarterly net income for the first quarter of 2024 was
Three Months Ended | |||||||||
Non-GAAP Reconciliation of Unanticipated Expenses | March 31, 2024 | ||||||||
(dollars in thousands; unaudited) | Actual | Unanticipated Expenses | Adjusted | ||||||
Net interest income | $ | 60,936 | $ | — | $ | 60,936 | |||
Provision for credit losses | (83,158 | ) | (1,096 | ) | (82,062 | ) | |||
Noninterest income | 86,955 | — | 86,955 | ||||||
Noninterest expense(1) | (56,018 | ) | (1,915 | ) | (54,103 | ) | |||
Income before provision for income tax | 8,715 | (3,010 | ) | 11,725 | |||||
Provision for income tax | (1,915 | ) | 662 | (2,577 | ) | ||||
Net income | $ | 6,800 | $ | (2,348 | ) | $ | 9,148 |
(1) Detail of unanticipated noninterest expenses shown in table above:
Unanticipated noninterest expense: | ||
Audit and accounting services | $ | 849 |
Contract termination fee | 600 | |
Operational loss | 122 | |
Employment realignment costs | 343 | |
Total unanticipated noninterest expense items | $ | 1,915 |
Total assets increased
We saw solid deposit growth in the first quarter, with deposits increasing
"In the current economic climate, banks and Banking-as-a-Service ("BaaS") providers are facing significant challenges. However, I am pleased to share that our Company is weathering these difficulties and continuing to grow and build for a strong future. Despite the uncertain times, we have managed to sustain our growth trajectory, improve our credit quality and position ourselves to be a premier BaaS service provider in the future.
We have been proactive in adapting to these challenging circumstances. We have implemented and are enhancing our robust risk management practices, closely monitoring our loan portfolios and enhancing our credit standards for CCBX loans while building and enhancing our existing compliance AML/BSA, risk and internal control processes. These steps are designed to mitigate potential compliance and credit risks, safeguard the quality of our assets and continue to grow.
Additionally, a primary initiative for us is to invest in technology designed to increase automation and enhance operational efficiency, productivity and cost structure, however, this requires significant upfront expense. This includes the costs associated with acquiring and implementing advanced technologies, addressing risks timely when they appear, training employees, and integrating new systems into existing infrastructure. We believe investing in automation for the future is crucial for us to stay ahead in an increasingly competitive landscape. By streamlining processes, reducing labor costs, and improving overall efficiency, we expect automation to make our business more scalable and better able to manage expenses in the future.
This investment in technology and the challenges from the economic environment impacted net income for the quarter ended March 31, 2024 and we expect that this strategy will continue to impact earnings in the short term, but we believe we are positioning ourselves for long term success," stated Eric Sprink, the CEO of the Company and the Bank.
Results of Operations Overview
The Company has one main subsidiary, the Bank which consists of three segments: CCBX, the community bank and treasury & administration. The CCBX segment includes our BaaS activities, the community bank segment includes all community banking activities, and the treasury & administration segment includes treasury management, overall administration and all other aspects of the Company. Net interest income was
Interest and fees on loans totaled
Interest income from interest earning deposits with other banks was
Total interest expense was
Total cost of deposits was
Net Interest Margin
Net interest margin was
Cost of funds was
During the quarter ended March 31, 2024, total loans receivable increased by
Total yield on loans receivable for the quarter ended March 31, 2024 was
The following table summarizes the average yield on loans receivable and cost of deposits for our community bank and CCBX segments for the periods indicated:
For the Three Months Ended | |||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||
Yield on Loans (2) | Cost of Deposits (2) | Yield on Loans (2) | Cost of Deposits (2) | Yield on Loans (2) | Cost of Deposits (2) | ||||||
Community Bank | |||||||||||
CCBX (1) | |||||||||||
Consolidated |
(1) CCBX yield on loans does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit and fraud enhancements and originating & servicing CCBX loans. To determine Net BaaS loan income earned from CCBX loan relationships, the Company takes BaaS loan interest income and deducts BaaS loan expense to arrive at Net BaaS loan income which can be compared to interest income on the Company’s community bank loans. See reconciliation of the non-GAAP measures at the end of this earnings release for the impact of BaaS loan expense on CCBX loan yield.
(2) Annualized calculations for periods shown.
The following tables illustrates how BaaS loan interest income is affected by BaaS loan expense resulting in net BaaS loan income and the associated yield:
For the Three Months Ended | ||||||||||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||||||||||||
(dollars in thousands, unaudited) | Income / Expense | Income / expense divided by average CCBX loans (2) | Income / Expense | Income / expense divided by average CCBX loans(2) | Income / Expense | Income / expense divided by average CCBX loans (2) | ||||||||||||
BaaS loan interest income | $ | 54,569 | 17.34 | % | $ | 52,327 | 17.36 | % | $ | 42,220 | 16.09 | % | ||||||
Less: BaaS loan expense | 24,837 | 7.89 | % | 24,310 | 8.06 | % | 17,554 | 6.69 | % | |||||||||
Net BaaS loan income (1) | $ | 29,732 | 9.45 | % | $ | 28,017 | 9.30 | % | $ | 24,666 | 9.40 | % | ||||||
Average BaaS Loans(3) | $ | 1,265,857 | $ | 1,196,137 | $ | 1,064,192 |
(1) A reconciliation of the non-GAAP measures are set forth at the end of this earnings release.
(2) Annualized calculations shown for quarterly periods presented.
(3) Includes loans held for sale.
Key Performance Ratios
ROA was
The following table shows the Company’s key performance ratios for the periods indicated.
Three Months Ended | |||||||||||||||
(unaudited) | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||
Return on average assets (1) | 0.73 | % | 0.97 | % | 1.13 | % | 1.52 | % | 1.58 | % | |||||
Return on average equity (1) | 9.21 | % | 12.35 | % | 14.60 | % | 19.53 | % | 19.89 | % | |||||
Yield on earnings assets (1) | 10.07 | % | 9.77 | % | 10.08 | % | 10.18 | % | 9.19 | % | |||||
Yield on loans receivable (1) | 10.85 | % | 10.71 | % | 10.84 | % | 10.85 | % | 9.95 | % | |||||
Cost of funds (1) | 3.52 | % | 3.39 | % | 3.18 | % | 2.77 | % | 2.19 | % | |||||
Cost of deposits (1) | 3.49 | % | 3.36 | % | 3.14 | % | 2.72 | % | 2.13 | % | |||||
Net interest margin (1) | 6.78 | % | 6.61 | % | 7.10 | % | 7.58 | % | 7.15 | % | |||||
Noninterest expense to average assets (1) | 6.04 | % | 5.56 | % | 6.23 | % | 6.11 | % | 5.69 | % | |||||
Noninterest income to average assets (1) | 9.38 | % | 6.95 | % | 3.81 | % | 6.90 | % | 6.28 | % | |||||
Efficiency ratio | 37.88 | % | 41.58 | % | 58.36 | % | 42.92 | % | 43.03 | % | |||||
Loans receivable to deposits (2) | 92.42 | % | 90.05 | % | 90.19 | % | 96.23 | % | 92.55 | % |
(1) Annualized calculations shown for quarterly periods presented.
(2) Includes loans held for sale.
Noninterest Income
The following table details noninterest income for the periods indicated:
Three Months Ended | ||||||||
March 31, | December 31, | March 31, | ||||||
(dollars in thousands; unaudited) | 2024 | 2023 | 2023 | |||||
Deposit service charges and fees | $ | 908 | $ | 957 | $ | 910 | ||
Loan referral fees | 168 | — | — | |||||
Unrealized gain (loss) on equity securities, net | 15 | 80 | 39 | |||||
Gain on sales of loans, net | — | — | 123 | |||||
Other | 308 | 60 | 299 | |||||
Noninterest income, excluding BaaS program income and BaaS indemnification income | 1,399 | 1,097 | 1,371 | |||||
Servicing and other BaaS fees | 1,131 | 1,015 | 948 | |||||
Transaction fees | 1,122 | 1,006 | 917 | |||||
Interchange fees | 1,539 | 1,272 | 789 | |||||
Reimbursement of expenses | 1,033 | 1,076 | 921 | |||||
BaaS program income | 4,825 | 4,369 | 3,575 | |||||
BaaS credit enhancements | 79,808 | 58,449 | 42,362 | |||||
Baas fraud enhancements | 923 | 779 | 1,999 | |||||
BaaS indemnification income | 80,731 | 59,228 | 44,361 | |||||
Total BaaS income | 85,556 | 63,597 | 47,936 | |||||
Total noninterest income | $ | 86,955 | $ | 64,694 | $ | 49,307 |
Noninterest income was
Our CCBX segment continues to evolve, and we have 21 relationships, at varying stages, as of March 31, 2024. We continue to refine the criteria for CCBX partnerships and are exiting relationships where it makes sense and are focusing on larger more established partners, with experienced management teams, existing customer bases and strong financial positions. The sale of CCBX loans during the quarters ended September 30, 2023, December 31, 2023 and March 31, 2024 are part of our strategy to strengthen the balance sheet, reduce credit exposure in certain loan categories and lower the overall potential credit risk in our loan portfolio. These sales resulted in a tighter interest margin in the quarter ended March 31, 2024, as higher quality loans yield less than higher risk loans. The size of our CCBX loan portfolio increased during the quarter ended March 31, 2024 and we expect it to continue increasing as we work to grow the portfolio with loans that are subject to increased underwriting standards.
Coastal worked with One and Robinhood to launch two new lending products in Q1 that can reach wide, established customer bases. One launched its offering of point-of-sale installment loans through Walmart. These loans, which can be offered with customer friendly pricing and payment features similar to so-called "Buy Now Pay Later" products, are fully disclosed and offered as standard credit products, avoiding concerns raised with respect to more typical Buy Now Pay Later offerings. Likewise, Robinhood Credit launched a new credit card that will be marketed to Robinhood’s customers.
The following table illustrates the activity and evolution in CCBX relationships for the periods presented.
As of | |||
(unaudited) | March 31, 2024 | December 31, 2023 | March 31, 2023 |
Active | 19 | 19 | 18 |
Friends and family / testing | 1 | 1 | 1 |
Implementation / onboarding | 1 | 1 | 1 |
Signed letters of intent | 0 | 0 | 4 |
Wind down - active but preparing to exit relationship | 0 | 0 | 1 |
Total CCBX relationships | 21 | 21 | 25 |
The following table details noninterest expense for the periods indicated:
Noninterest Expense
Three Months Ended | |||||||||
March 31, | December 31, | March 31, | |||||||
(dollars in thousands; unaudited) | 2024 | 2023 | 2023 | ||||||
Salaries and employee benefits | $ | 17,984 | $ | 16,490 | $ | 15,575 | |||
Legal and professional expenses | 3,672 | 2,649 | 3,062 | ||||||
Data processing and software licenses | 2,892 | 2,417 | 1,840 | ||||||
Occupancy | 1,518 | 1,340 | 1,219 | ||||||
Point of sale expense | 869 | 899 | 753 | ||||||
Director and staff expenses | 400 | 478 | 626 | ||||||
FDIC assessments | 683 | 665 | 595 | ||||||
Excise taxes | 320 | 449 | 455 | ||||||
Marketing | 53 | 138 | 95 | ||||||
Other | 1,867 | 1,089 | 890 | ||||||
Noninterest expense, excluding BaaS loan and BaaS fraud expense | 30,258 | 26,614 | 25,110 | ||||||
BaaS loan expense | 24,837 | 24,310 | 17,554 | ||||||
BaaS fraud expense | 923 | 779 | 1,999 | ||||||
BaaS loan and fraud expense | 25,760 | 25,089 | 19,553 | ||||||
Total noninterest expense | $ | 56,018 | $ | 51,703 | $ | 44,663 |
Total noninterest expense increased
The increase in noninterest expenses for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023 were largely due to an increase of
Provision for Income Taxes
The provision for income taxes was
Financial Condition Overview
Total assets increased
Total assets increased
Loans Receivable
Total loans receivable increased
The following table summarizes the loan portfolio at the period indicated:
Consolidated | As of March 31, 2024 | As of December 31, 2023 | As of March 31, 2023 | |||||||||||||||||
(dollars in thousands; unaudited) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||
Commercial and industrial loans: | ||||||||||||||||||||
Capital call lines | $ | 135,671 | 4.2 | % | $ | 87,494 | 2.9 | % | $ | 118,796 | 4.2 | % | ||||||||
All other commercial & industrial loans | 201,555 | 6.3 | 203,800 | 6.7 | 207,542 | 7.3 | ||||||||||||||
Total commercial and industrial loans: | 337,226 | 10.5 | 291,294 | 9.6 | 326,338 | 11.5 | ||||||||||||||
Real estate loans: | ||||||||||||||||||||
Construction, land and land development | 160,862 | 5.0 | 157,100 | 5.2 | 206,635 | 7.3 | ||||||||||||||
Residential real estate | 496,305 | 15.5 | 463,426 | 15.3 | 455,507 | 16.0 | ||||||||||||||
Commercial real estate | 1,342,489 | 41.9 | 1,303,533 | 43.0 | 1,102,771 | 38.8 | ||||||||||||||
Consumer and other loans | 870,134 | 27.1 | 818,039 | 26.9 | 752,528 | 26.4 | ||||||||||||||
Gross loans receivable | 3,207,016 | 100.0 | % | 3,033,392 | 100.0 | % | 2,843,779 | 100.0 | % | |||||||||||
Net deferred origination fees | (7,462 | ) | (7,300 | ) | (6,575 | ) | ||||||||||||||
Loans receivable | $ | 3,199,554 | $ | 3,026,092 | $ | 2,837,204 | ||||||||||||||
Loan Yield (1) | 10.85 | % | 10.71 | % | 9.95 | % |
(1) Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.
Please see Appendix A for additional loan portfolio detail regarding industry concentrations.
The following tables detail the community bank and CCBX loans which are included in the total loan portfolio table above.
Community Bank | As of | ||||||||||||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||||||||||||
(dollars in thousands; unaudited) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
Commercial and industrial loans | $ | 154,395 | 8.2 | % | $ | 149,502 | 8.2 | % | $ | 158,873 | 9.5 | % | |||||||||
Real estate loans: | |||||||||||||||||||||
Construction, land and land development loans | 160,862 | 8.5 | 157,100 | 8.5 | 206,635 | 12.3 | |||||||||||||||
Residential real estate loans | 231,157 | 12.2 | 225,391 | 12.3 | 206,140 | 12.3 | |||||||||||||||
Commercial real estate loans | 1,342,489 | 71.0 | 1,303,533 | 70.9 | 1,102,771 | 65.7 | |||||||||||||||
Consumer and other loans: | |||||||||||||||||||||
Other consumer and other loans | 1,447 | 0.1 | 1,628 | 0.1 | 2,860 | 0.2 | |||||||||||||||
Gross Community Bank loans receivable | 1,890,350 | 100.0 | % | 1,837,154 | 100.0 | % | 1,677,279 | 100.0 | % | ||||||||||||
Net deferred origination fees | (7,068 | ) | (7,000 | ) | (6,265 | ) | |||||||||||||||
Loans receivable | $ | 1,883,282 | $ | 1,830,154 | $ | 1,671,014 | |||||||||||||||
Loan Yield(1) | 6.46 | % | 6.32 | % | 5.97 | % |
(1) Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.
CCBX | As of | ||||||||||||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||||||||||||
(dollars in thousands; unaudited) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
Commercial and industrial loans: | |||||||||||||||||||||
Capital call lines | $ | 135,671 | 10.3 | % | $ | 87,494 | 7.3 | % | $ | 118,796 | 10.2 | % | |||||||||
All other commercial & industrial loans | 47,160 | 3.6 | 54,298 | 4.5 | 48,669 | 4.1 | |||||||||||||||
Real estate loans: | |||||||||||||||||||||
Residential real estate loans | 265,148 | 20.1 | 238,035 | 19.9 | 249,367 | 21.4 | |||||||||||||||
Consumer and other loans: | |||||||||||||||||||||
Credit cards | 505,706 | 38.4 | 505,837 | 42.3 | 318,187 | 27.3 | |||||||||||||||
Other consumer and other loans | 362,981 | 27.6 | 310,574 | 26.0 | 431,481 | 37.0 | |||||||||||||||
Gross CCBX loans receivable | 1,316,666 | 100.0 | % | 1,196,238 | 100.0 | % | 1,166,500 | 100.0 | % | ||||||||||||
Net deferred origination (fees) costs | (394 | ) | (300 | ) | (310 | ) | |||||||||||||||
Loans receivable | $ | 1,316,272 | $ | 1,195,938 | $ | 1,166,190 | |||||||||||||||
Loan Yield - CCBX (1)(2) | 17.34 | % | 17.36 | % | 16.09 | % | |||||||||||||||
(1) CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements and originating & servicing CCBX loans. See reconciliation of the non-GAAP measures at the end of this earnings release for the impact of BaaS loan expense on CCBX loan yield.
(2) Loan yield is annualized for the three months ended for each period presented and includes loans held for sale and nonaccrual loans.
Deposits
Total deposits increased
Total deposits increased
Additionally, as of March 31, 2024,
The following table summarizes the deposit portfolio for the periods indicated.
Consolidated | As of March 31, 2024 | As of December 31, 2023 | As of March 31, 2023 | |||||||||||||||||
(dollars in thousands; unaudited) | Amount | Percent of Total Deposits | Balance | Percent of Total Deposits | Balance | Percent of Total Deposits | ||||||||||||||
Demand, noninterest bearing | $ | 574,112 | 16.6 | % | $ | 625,202 | 18.6 | % | $ | 761,800 | 24.6 | % | ||||||||
Interest bearing demand and money market | 2,799,667 | 80.9 | 2,640,240 | 78.6 | 2,207,121 | 71.3 | ||||||||||||||
Savings | 74,085 | 2.1 | 76,562 | 2.3 | 99,241 | 3.2 | ||||||||||||||
Total core deposits | 3,447,864 | 99.6 | 3,342,004 | 99.5 | 3,068,162 | 99.1 | ||||||||||||||
Brokered deposits | 1 | 0.0 | 1 | 0.0 | 1 | — | ||||||||||||||
Time deposits less than | 7,199 | 0.2 | 8,109 | 0.2 | 11,343 | 0.4 | ||||||||||||||
Time deposits | 7,915 | 0.2 | 10,249 | 0.3 | 15,717 | 0.5 | ||||||||||||||
Total | $ | 3,462,979 | 100.0 | % | $ | 3,360,363 | 100.0 | % | $ | 3,095,223 | 100.0 | % | ||||||||
Cost of deposits (1) | 3.49 | % | 3.36 | % | 2.13 | % |
(1) Cost of deposits is annualized for the three months ended for each period presented.
The following tables detail the community bank and CCBX deposits which are included in the total deposit portfolio table above.
Community Bank | As of | ||||||||||||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||||||||||||
(dollars in thousands; unaudited) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
Demand, noninterest bearing | $ | 515,443 | 35.9 | % | $ | 561,572 | 37.5 | % | $ | 664,452 | 43.4 | % | |||||||||
Interest bearing demand and money market | 834,725 | 58.2 | 846,072 | 56.5 | 743,548 | 48.6 | |||||||||||||||
Savings | 68,747 | 4.8 | 71,598 | 4.8 | 96,330 | 6.3 | |||||||||||||||
Total core deposits | 1,418,915 | 98.9 | 1,479,242 | 98.8 | 1,504,330 | 98.3 | |||||||||||||||
Brokered deposits | 1 | 0.0 | 1 | 0.0 | 1 | 0.0 | |||||||||||||||
Time deposits less than | 7,199 | 0.5 | 8,109 | 0.5 | 11,343 | 0.7 | |||||||||||||||
Time deposits | 7,915 | 0.6 | 10,249 | 0.7 | 15,717 | 1.0 | |||||||||||||||
Total Community Bank deposits | $ | 1,434,030 | 100.0 | % | $ | 1,497,601 | 100.0 | % | $ | 1,531,391 | 100.0 | % | |||||||||
Cost of deposits(1) | 1.66 | % | 1.57 | % | 0.66 | % |
(1) Cost of deposits is annualized for the three months ended for each period presented.
CCBX | As of | ||||||||||||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||||||||||||
(dollars in thousands; unaudited) | Balance | % to Total | Balance | % to Total | Balance | % to Total | |||||||||||||||
Demand, noninterest bearing | $ | 58,669 | 2.9 | % | $ | 63,630 | 3.4 | % | $ | 97,348 | 6.2 | % | |||||||||
Interest bearing demand and money market | 1,964,942 | 96.8 | 1,794,168 | 96.3 | 1,463,573 | 93.6 | |||||||||||||||
Savings | 5,338 | 0.3 | 4,964 | 0.3 | 2,911 | 0.2 | |||||||||||||||
Total core deposits | 2,028,949 | 100.0 | 1,862,762 | 100.0 | 1,563,832 | 100.0 | |||||||||||||||
BaaS-brokered deposits | — | 0.0 | — | 0.0 | — | — | |||||||||||||||
Total CCBX deposits | $ | 2,028,949 | 100.0 | % | $ | 1,862,762 | 100.0 | % | $ | 1,563,832 | 100.0 | % | |||||||||
Cost of deposits (1) | 4.93 | % | 4.90 | % | 3.89 | % |
(1) Cost of deposits is annualized for the three months ended for each period presented.
Borrowings
As of March 31, 2024, the Company had the capacity to borrow up to a total of
Shareholders’ Equity
The Company had a cash balance of
Total shareholders’ equity increased
Capital Ratios
The Company and the Bank remained well capitalized at March 31, 2024, as summarized in the following table.
(unaudited) | Coastal Community Bank | Coastal Financial Corporation | Minimum Well Capitalized Ratios under Prompt Corrective Action (1) | ||||||
Tier 1 Leverage Capital (to average assets) | 9.19 | % | 8.24 | % | 5.00 | % | |||
Common Equity Tier 1 Capital (to risk-weighted assets) | 10.14 | % | 8.98 | % | 6.50 | % | |||
Tier 1 Capital (to risk-weighted assets) | 10.14 | % | 9.08 | % | 8.00 | % | |||
Total Capital (to risk-weighted assets) | 11.43 | % | 11.70 | % | 10.00 | % |
(1) Presents the minimum capital ratios for an insured depository institution, such as the Bank, to be considered well capitalized under the Prompt Corrective Action framework. The minimum requirements for the Company to be considered well capitalized under Regulation Y include to maintain, on a consolidated basis, a total risk-based capital ratio of 10.0 percent or greater and a tier 1 risk-based capital ratio of 6.0 percent or greater.
Asset Quality
The total allowance for credit losses was
The following table details the allocation of the allowance for credit loss as of the period indicated:
As of March 31, 2024 | As of December 31, 2023 | As of March 31, 2023 | ||||||||||||||||||||||||||||||||||
(dollars in thousands; unaudited) | Community Bank | CCBX | Total | Community Bank | CCBX | Total | Community Bank | CCBX | Total | |||||||||||||||||||||||||||
Loans receivable | $ | 1,883,282 | $ | 1,316,272 | $ | 3,199,554 | $ | 1,830,154 | $ | 1,195,938 | $ | 3,026,092 | $ | 1,671,014 | $ | 1,166,190 | $ | 2,837,204 | ||||||||||||||||||
Allowance for credit losses | (21,384 | ) | (117,874 | ) | (139,258 | ) | (21,595 | ) | (95,363 | ) | (116,958 | ) | (20,708 | ) | (68,415 | ) | (89,123 | ) | ||||||||||||||||||
Allowance for credit losses to total loans receivable | 1.14 | % | 8.96 | % | 4.35 | % | 1.18 | % | 7.97 | % | 3.86 | % | 1.24 | % | 5.87 | % | 3.14 | % |
Provision for credit losses - loans totaled
Net charge-offs for this
The following table details net charge-offs for the community bank and CCBX for the period indicated:
Three Months Ended | ||||||||||||||||||||||||||||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||||||||||||||||||||||||||||||
(dollars in thousands; unaudited) | Community Bank | CCBX | Total | Community Bank | CCBX | Total | Community Bank | CCBX | Total | |||||||||||||||||||||||||||
Gross charge-offs | $ | 15 | $ | 58,979 | $ | 58,994 | $ | 2 | $ | 47,650 | $ | 47,652 | $ | 50 | $ | 34,117 | $ | 34,167 | ||||||||||||||||||
Gross recoveries | (4 | ) | (1,772 | ) | (1,776 | ) | (4 | ) | (2,777 | ) | (2,781 | ) | (5 | ) | (1,860 | ) | (1,865 | ) | ||||||||||||||||||
Net charge-offs | $ | 11 | $ | 57,207 | $ | 57,218 | $ | (2 | ) | $ | 44,873 | $ | 44,871 | $ | 45 | $ | 32,257 | $ | 32,302 | |||||||||||||||||
Net charge-offs to average loans (1) | 0.00 | % | 18.18 | % | 7.34 | % | 0.00 | % | 14.88 | % | 5.92 | % | 0.01 | % | 12.29 | % | 4.84 | % |
(1) Annualized calculations shown for periods presented.
The increase in the Company’s provision for credit losses - loans during the quarter ended March 31, 2024, is a result of an increase in loans receivable. During the quarter ended March 31, 2024, a
In the quarter ended March 31, 2024, management re-evaluated and updated its assumptions to more accurately reflect the risk of unfunded commitments and to better reflect the loss rate of the community bank portfolio overall. As a result, management increased the unfunded commitment provision for the community bank by
In accordance with accounting guidance, we estimate and record a provision for expected losses for these CCBX loans and reclassified negative deposit accounts. When the provision for CCBX credit losses and provision for unfunded commitments is recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements). Expected losses are recorded in the allowance for credit losses. The credit enhancement asset is relieved when credit enhancement recoveries are received from the CCBX partner. If our partner is unable to fulfill their contracted obligations then the Bank could be exposed to additional credit losses. Management regularly evaluates and manages this counterparty risk.
The factors used in management’s analysis for community bank credit losses indicated that a provision recapture of
The following table details the provision expense/(recapture) for the community bank and CCBX for the period indicated:
Three Months Ended | ||||||||||
(dollars in thousands; unaudited) | March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||
Community bank | $ | (199 | ) | $ | 277 | $ | 428 | |||
CCBX | 79,717 | 60,467 | 43,116 | |||||||
Total provision expense | $ | 79,518 | $ | 60,744 | $ | 43,544 |
At March 31, 2024, our nonperforming assets were
For the quarter ended March 31, 2024, there were
The following table details the Company’s nonperforming assets for the periods indicated.
Consolidated | |||||||||||
(dollars in thousands; unaudited) | As of March 31, 2024 | As of December 31, 2023 | As of March 31, 2023 | ||||||||
Nonaccrual loans: | |||||||||||
Commercial and industrial loans | $ | — | $ | — | $ | 15 | |||||
Real estate loans: | |||||||||||
Construction, land and land development | — | — | 66 | ||||||||
Residential real estate | 212 | 170 | — | ||||||||
Commercial real estate | 7,731 | 7,145 | 6,901 | ||||||||
Total nonaccrual loans | 7,943 | 7,315 | 6,982 | ||||||||
Accruing loans past due 90 days or more: | |||||||||||
Commercial & industrial loans | 1,793 | 2,086 | 187 | ||||||||
Real estate loans: | |||||||||||
Residential real estate loans | 1,796 | 1,115 | 946 | ||||||||
Consumer and other loans: | |||||||||||
Credit cards | 37,603 | 34,835 | 17,772 | ||||||||
Other consumer and other loans | 5,731 | 8,488 | 5,657 | ||||||||
Total accruing loans past due 90 days or more | 46,923 | 46,524 | 24,562 | ||||||||
Total nonperforming loans | 54,866 | 53,839 | 31,544 | ||||||||
Real estate owned | — | — | — | ||||||||
Repossessed assets | — | — | — | ||||||||
Total nonperforming assets | $ | 54,866 | $ | 53,839 | $ | 31,544 | |||||
Total nonaccrual loans to loans receivable | 0.25 | % | 0.24 | % | 0.25 | % | |||||
Total nonperforming loans to loans receivable | 1.71 | % | 1.78 | % | 1.11 | % | |||||
Total nonperforming assets to total assets | 1.42 | % | 1.43 | % | 0.91 | % |
The following tables detail the community bank and CCBX nonperforming assets which are included in the total nonperforming assets table above.
Community Bank | As of | |||||||
(dollars in thousands; unaudited) | March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||
Nonaccrual loans: | ||||||||
Commercial and industrial loans | $ | — | $ | — | $ | 15 | ||
Real estate: | ||||||||
Construction, land and land development | — | — | 66 | |||||
Residential real estate | 212 | 170 | — | |||||
Commercial real estate | 7,731 | 7,145 | 6,901 | |||||
Total nonaccrual loans | 7,943 | 7,315 | 6,982 | |||||
Accruing loans past due 90 days or more: | ||||||||
Total accruing loans past due 90 days or more | — | — | — | |||||
Total nonperforming loans | 7,943 | 7,315 | 6,982 | |||||
Other real estate owned | — | — | — | |||||
Repossessed assets | — | — | — | |||||
Total nonperforming assets | $ | 7,943 | $ | 7,315 | $ | 6,982 |
CCBX | As of | |||||||
(dollars in thousands; unaudited) | March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||
Nonaccrual loans | $ | — | $ | — | $ | — | ||
Accruing loans past due 90 days or more: | ||||||||
Commercial & industrial loans | 1,793 | 2,086 | 187 | |||||
Real estate loans: | ||||||||
Residential real estate loans | 1,796 | 1,115 | 946 | |||||
Consumer and other loans: | ||||||||
Credit cards | 37,603 | 34,835 | 17,772 | |||||
Other consumer and other loans | 5,731 | 8,488 | 5,657 | |||||
Total accruing loans past due 90 days or more | 46,923 | 46,524 | 24,562 | |||||
Total nonperforming loans | 46,923 | 46,524 | 24,562 | |||||
Other real estate owned | — | — | — | |||||
Repossessed assets | — | — | — | |||||
Total nonperforming assets | $ | 46,923 | $ | 46,524 | $ | 24,562 |
About Coastal Financial
Coastal Financial Corporation (Nasdaq: CCB) (the “Company”), is an Everett, Washington based bank holding company whose wholly owned subsidiaries are Coastal Community Bank (“Bank”) and Arlington Olympic LLC. The
CCB-ER
Contact
Eric Sprink, Chief Executive Officer, (425) 357-3659
Joel Edwards, Executive Vice President & Chief Financial Officer, (425) 357-3687
Forward-Looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of or reference to forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of risks, uncertainties and assumptions that are difficult to predict. Factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the risks and uncertainties discussed under “Risk Factors” in our Annual Report on Form 10-K for the most recent period filed and in any of our subsequent filings with the Securities and Exchange Commission.
If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. You are cautioned not to place undue reliance on forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law.
COASTAL FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands; unaudited) | |||||||||||
ASSETS | |||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||
Cash and due from banks | $ | 32,790 | $ | 31,345 | $ | 37,676 | |||||
Interest earning deposits with other banks | 482,338 | 451,783 | 356,240 | ||||||||
Investment securities, available for sale, at fair value | 41 | 99,504 | 97,999 | ||||||||
Investment securities, held to maturity, at amortized cost | 50,049 | 50,860 | 3,705 | ||||||||
Other investments | 10,583 | 10,227 | 11,346 | ||||||||
Loans held for sale | 797 | — | 27,292 | ||||||||
Loans receivable | 3,199,554 | 3,026,092 | 2,837,204 | ||||||||
Allowance for credit losses | (139,258 | ) | (116,958 | ) | (89,123 | ) | |||||
Total loans receivable, net | 3,060,296 | 2,909,134 | 2,748,081 | ||||||||
CCBX credit enhancement asset | 137,276 | 107,921 | 76,395 | ||||||||
CCBX receivable | 10,369 | 9,088 | 13,681 | ||||||||
Premises and equipment, net | 22,995 | 22,090 | 18,030 | ||||||||
Operating lease right-of-use assets | 5,756 | 5,932 | 4,812 | ||||||||
Accrued interest receivable | 24,681 | 26,819 | 19,321 | ||||||||
Bank-owned life insurance, net | 12,991 | 12,870 | 12,761 | ||||||||
Deferred tax asset, net | 2,221 | 3,806 | 20,527 | ||||||||
Other assets | 12,075 | 11,987 | 3,167 | ||||||||
Total assets | $ | 3,865,258 | $ | 3,753,366 | $ | 3,451,033 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
LIABILITIES | |||||||||||
Deposits | $ | 3,462,979 | $ | 3,360,363 | $ | 3,095,223 | |||||
Subordinated debt, net | 44,181 | 44,144 | 44,031 | ||||||||
Junior subordinated debentures, net | 3,590 | 3,590 | 3,588 | ||||||||
Deferred compensation | 442 | 479 | 582 | ||||||||
Accrued interest payable | 1,061 | 892 | 874 | ||||||||
Operating lease liabilities | 5,946 | 6,124 | 5,022 | ||||||||
CCBX payable | 33,095 | 33,651 | 30,794 | ||||||||
Other liabilities | 10,255 | 9,145 | 12,156 | ||||||||
Total liabilities | 3,561,549 | 3,458,388 | 3,192,270 | ||||||||
SHAREHOLDERS’ EQUITY | |||||||||||
Common stock | 131,601 | 130,136 | 127,447 | ||||||||
Retained earnings | 172,110 | 165,311 | 133,123 | ||||||||
Accumulated other comprehensive loss, net of tax | (2 | ) | (469 | ) | (1,807 | ) | |||||
Total shareholders’ equity | 303,709 | 294,978 | 258,763 | ||||||||
Total liabilities and shareholders’ equity | $ | 3,865,258 | $ | 3,753,366 | $ | 3,451,033 |
COASTAL FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts; unaudited) | ||||||||||
Three Months Ended | ||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||||
INTEREST AND DIVIDEND INCOME | ||||||||||
Interest and fees on loans | $ | 84,621 | $ | 81,159 | $ | 66,431 | ||||
Interest on interest earning deposits with other banks | 4,780 | 5,687 | 3,097 | |||||||
Interest on investment securities | 1,034 | 1,225 | 553 | |||||||
Dividends on other investments | 37 | 172 | 30 | |||||||
Total interest income | 90,472 | 88,243 | 70,111 | |||||||
INTEREST EXPENSE | ||||||||||
Interest on deposits | 28,867 | 27,916 | 14,958 | |||||||
Interest on borrowed funds | 669 | 670 | 662 | |||||||
Total interest expense | 29,536 | 28,586 | 15,620 | |||||||
Net interest income | 60,936 | 59,657 | 54,491 | |||||||
PROVISION FOR CREDIT LOSSES | 83,158 | 60,789 | 43,697 | |||||||
Net interest income/(expense) after provision for credit losses | (22,222 | ) | (1,132 | ) | 10,794 | |||||
NONINTEREST INCOME | ||||||||||
Deposit service charges and fees | 908 | 957 | 910 | |||||||
Loan referral fees | 168 | — | — | |||||||
Gain on sales of loans, net | — | — | 123 | |||||||
Unrealized gain (loss) on equity securities, net | 15 | 80 | 39 | |||||||
Other income | 308 | 60 | 299 | |||||||
Noninterest income, excluding BaaS program income and BaaS indemnification income | 1,399 | 1,097 | 1,371 | |||||||
Servicing and other BaaS fees | 1,131 | 1,015 | 948 | |||||||
Transaction fees | 1,122 | 1,006 | 917 | |||||||
Interchange fees | 1,539 | 1,272 | 789 | |||||||
Reimbursement of expenses | 1,033 | 1,076 | 921 | |||||||
BaaS program income | 4,825 | 4,369 | 3,575 | |||||||
BaaS credit enhancements | 79,808 | 58,449 | 42,362 | |||||||
BaaS fraud enhancements | 923 | 779 | 1,999 | |||||||
BaaS indemnification income | 80,731 | 59,228 | 44,361 | |||||||
Total noninterest income | 86,955 | 64,694 | 49,307 | |||||||
NONINTEREST EXPENSE | ||||||||||
Salaries and employee benefits | 17,984 | 16,490 | 15,575 | |||||||
Occupancy | 1,518 | 1,340 | 1,219 | |||||||
Data processing and software licenses | 2,892 | 2,417 | 1,840 | |||||||
Legal and professional expenses | 3,672 | 2,649 | 3,062 | |||||||
Point of sale expense | 869 | 899 | 753 | |||||||
Excise taxes | 320 | 449 | 455 | |||||||
Federal Deposit Insurance Corporation ("FDIC") assessments | 683 | 665 | 595 | |||||||
Director and staff expenses | 400 | 478 | 626 | |||||||
Marketing | 53 | 138 | 95 | |||||||
Other expense | 1,867 | 1,089 | 890 | |||||||
Noninterest expense, excluding BaaS loan and BaaS fraud expense | 30,258 | 26,614 | 25,110 | |||||||
BaaS loan expense | 24,837 | 24,310 | 17,554 | |||||||
BaaS fraud expense | 923 | 779 | 1,999 | |||||||
BaaS loan and fraud expense | 25,760 | 25,089 | 19,553 | |||||||
Total noninterest expense | 56,018 | 51,703 | 44,663 | |||||||
Income before provision for income taxes | 8,715 | 11,859 | 15,438 | |||||||
PROVISION FOR INCOME TAXES | 1,915 | 2,847 | 3,047 | |||||||
NET INCOME | $ | 6,800 | $ | 9,012 | $ | 12,391 | ||||
Basic earnings per common share | $ | 0.51 | $ | 0.68 | $ | 0.94 | ||||
Diluted earnings per common share | $ | 0.50 | $ | 0.66 | $ | 0.91 | ||||
Weighted average number of common shares outstanding: | ||||||||||
Basic | 13,340,997 | 13,286,828 | 13,196,960 | |||||||
Diluted | 13,676,917 | 13,676,513 | 13,609,491 |
COASTAL FINANCIAL CORPORATION AVERAGE BALANCES, YIELDS, AND RATES – QUARTERLY (Dollars in thousands; unaudited) | |||||||||||||||||||||||||||||
For the Three Months Ended | |||||||||||||||||||||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||||||||||||||||||||
Average Balance | Interest & Dividends | Yield / Cost (1) | Average Balance | Interest & Dividends | Yield / Cost (1) | Average Balance | Interest & Dividends | Yield / Cost (1) | |||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Interest earning assets: | |||||||||||||||||||||||||||||
Interest earning deposits with other banks | $ | 350,868 | $ | 4,780 | 5.48 | % | $ | 413,127 | $ | 5,687 | 5.46 | % | $ | 271,700 | $ | 3,097 | 4.62 | % | |||||||||||
Investment securities, available for sale (2) | 64,878 | 349 | 2.16 | 100,204 | 546 | 2.16 | 100,273 | 535 | 2.16 | ||||||||||||||||||||
Investment securities, held to maturity (2) | 50,490 | 685 | 5.46 | 49,469 | 679 | 5.45 | 1,955 | 18 | 3.73 | ||||||||||||||||||||
Other investments | 10,262 | 37 | 1.45 | 11,683 | 172 | 5.84 | 10,633 | 30 | 1.14 | ||||||||||||||||||||
Loans receivable (3) | 3,137,271 | 84,621 | 10.85 | 3,007,289 | 81,159 | 10.71 | 2,708,177 | 66,431 | 9.95 | ||||||||||||||||||||
Total interest earning assets | 3,613,769 | 90,472 | 10.07 | 3,581,772 | 88,243 | 9.77 | 3,092,738 | 70,111 | 9.19 | ||||||||||||||||||||
Noninterest earning assets: | |||||||||||||||||||||||||||||
Allowance for credit losses | (114,985 | ) | (95,391 | ) | (81,086 | ) | |||||||||||||||||||||||
Other noninterest earning assets | 229,437 | 204,052 | 172,161 | ||||||||||||||||||||||||||
Total assets | $ | 3,728,221 | $ | 3,690,433 | $ | 3,183,813 | |||||||||||||||||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||||
Interest bearing liabilities: | |||||||||||||||||||||||||||||
Interest bearing deposits | $ | 2,728,884 | $ | 28,867 | 4.25 | % | $ | 2,660,235 | $ | 27,916 | 4.16 | % | $ | 2,070,217 | $ | 14,958 | 2.93 | % | |||||||||||
FHLB advances and other borrowings | 5 | — | — | 1 | — | — | — | — | — | ||||||||||||||||||||
Subordinated debt | 44,159 | 598 | 5.45 | 44,121 | 598 | 5.38 | 44,010 | 599 | 5.52 | ||||||||||||||||||||
Junior subordinated debentures | 3,590 | 71 | 7.95 | 3,590 | 72 | 7.96 | 3,588 | 63 | 7.12 | ||||||||||||||||||||
Total interest bearing liabilities | 2,776,638 | 29,536 | 4.28 | 2,707,947 | 28,586 | 4.19 | 2,117,815 | 15,620 | 2.99 | ||||||||||||||||||||
Noninterest bearing deposits | 595,693 | 640,424 | 775,940 | ||||||||||||||||||||||||||
Other liabilities | 58,829 | 52,450 | 37,448 | ||||||||||||||||||||||||||
Total shareholders' equity | 297,061 | 289,612 | 252,610 | ||||||||||||||||||||||||||
Total liabilities and shareholders' equity | $ | 3,728,221 | $ | 3,690,433 | $ | 3,183,813 | |||||||||||||||||||||||
Net interest income | $ | 60,936 | $ | 59,657 | $ | 54,491 | |||||||||||||||||||||||
Interest rate spread | 5.79 | % | 5.59 | % | 6.20 | % | |||||||||||||||||||||||
Net interest margin (4) | 6.78 | % | 6.61 | % | 7.15 | % |
(1) Yields and costs are annualized.
(2) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(3) Includes loans held for sale and nonaccrual loans.
(4) Net interest margin represents net interest income divided by the average total interest earning assets.
COASTAL FINANCIAL CORPORATION SELECTED AVERAGE BALANCES, YIELDS, AND RATES – BY SEGMENT - QUARTERLY (Dollars in thousands; unaudited) | ||||||||||||||||||||||||||
For the Three Months Ended | ||||||||||||||||||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||||||||||||||||||||
(dollars in thousands, unaudited) | Average Balance | Interest & Dividends | Yield / Cost (1) | Average Balance | Interest & Dividends | Yield / Cost (1) | Average Balance | Interest & Dividends | Yield / Cost (1) | |||||||||||||||||
Community Bank | ||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||
Loans receivable (2) | $ | 1,871,414 | $ | 30,052 | 6.46 | % | $ | 1,811,152 | $ | 28,832 | 6.32 | % | $ | 1,643,985 | $ | 24,211 | 5.97 | % | ||||||||
Total interest earning assets | 1,871,414 | 30,052 | 6.46 | 1,811,152 | 28,832 | 6.32 | 1,643,985 | 24,211 | 5.97 | |||||||||||||||||
Liabilities | ||||||||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||||
Interest bearing deposits | 922,340 | 6,013 | 2.62 | % | 951,148 | 6,090 | 2.54 | % | 853,152 | 2,534 | 1.20 | % | ||||||||||||||
Intrabank liability | 410,993 | 5,599 | 5.48 | 275,995 | 3,799 | 5.46 | 94,668 | 1,079 | 4.62 | |||||||||||||||||
Total interest bearing liabilities | 1,333,333 | 11,612 | 3.50 | 1,227,143 | 9,889 | 3.20 | 947,820 | 3,613 | 1.55 | |||||||||||||||||
Noninterest bearing deposits | 538,081 | 584,009 | 696,166 | |||||||||||||||||||||||
Net interest income | $ | 18,440 | $ | 18,943 | $ | 20,598 | ||||||||||||||||||||
Net interest margin(3) | 3.96 | % | 4.15 | % | 5.08 | % | ||||||||||||||||||||
CCBX | ||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||
Loans receivable (2)(4) | $ | 1,265,857 | $ | 54,569 | 17.34 | % | $ | 1,196,137 | $ | 52,327 | 17.36 | % | $ | 1,064,192 | $ | 42,220 | 16.09 | % | ||||||||
Intrabank asset | 598,299 | 8,151 | 5.48 | 569,365 | 7,837 | 5.46 | 232,647 | 2,652 | 4.62 | |||||||||||||||||
Total interest earning assets | 1,864,156 | 62,720 | 13.53 | 1,765,502 | 60,164 | 13.52 | 1,296,839 | 44,872 | 14.03 | |||||||||||||||||
Liabilities | ||||||||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||||
Interest bearing deposits | 1,806,544 | 22,854 | 5.09 | % | 1,709,087 | 21,826 | 5.07 | % | 1,217,065 | 12,424 | 4.14 | % | ||||||||||||||
Total interest bearing liabilities | 1,806,544 | 22,854 | 5.09 | 1,709,087 | 21,826 | 5.07 | 1,217,065 | 12,424 | 4.14 | |||||||||||||||||
Noninterest bearing deposits | 57,612 | 56,415 | 79,774 | |||||||||||||||||||||||
Net interest income | $ | 39,866 | $ | 38,338 | $ | 32,448 | ||||||||||||||||||||
Net interest margin(3) | 8.60 | % | 8.62 | % | 10.15 | % | ||||||||||||||||||||
Net interest margin, net of Baas loan expense (5) | 3.24 | % | 3.15 | % | 4.66 | % |
For the Three Months Ended | ||||||||||||||||||||||||||
March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||||||||||||||||||||
(dollars in thousands, unaudited) | Average Balance | Interest & Dividends | Yield / Cost (1) | Average Balance | Interest & Dividends | Yield / Cost (1) | Average Balance | Interest & Dividends | Yield / Cost (1) | |||||||||||||||||
Treasury & Administration | ||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||
Interest earning deposits with other banks | $ | 350,868 | $ | 4,780 | 5.48 | % | $ | 413,127 | $ | 5,687 | 5.46 | % | $ | 271,700 | $ | 3,097 | 4.62 | % | ||||||||
Investment securities, available for sale (6) | 64,878 | 349 | 2.16 | 100,204 | 546 | 2.16 | 100,273 | 535 | 2.16 | |||||||||||||||||
Investment securities, held to maturity (6) | 50,490 | 685 | 5.46 | 49,469 | 679 | 5.45 | 1,955 | 18 | 3.73 | |||||||||||||||||
Other investments | 10,262 | 37 | 1.45 | 11,683 | 172 | 5.84 | 10,633 | 30 | 1.15 | |||||||||||||||||
Total interest earning assets | 476,498 | 5,851 | 4.94 | % | 574,483 | — | 7,084 | 4.89 | % | 384,561 | 3,680 | 3.88 | % | |||||||||||||
Liabilities | ||||||||||||||||||||||||||
Interest bearing liabilities: | ||||||||||||||||||||||||||
FHLB advances and borrowings | $ | 5 | $ | — | 5.43 | % | 3 | — | — | % | — | — | — | % | ||||||||||||
Subordinated debt | 44,159 | 598 | 5.45 | % | 44,121 | 598 | 5.38 | % | 44,010 | 599 | 5.52 | % | ||||||||||||||
Junior subordinated debentures | 3,590 | 71 | 7.95 | 3,590 | 72 | 7.96 | 3,588 | 63 | 7.12 | |||||||||||||||||
Intrabank liability, net (7) | 187,306 | 2,552 | 5.48 | 293,370 | 4,038 | 5.46 | 137,979 | 1,573 | 4.62 | |||||||||||||||||
Total interest bearing liabilities | 235,060 | 3,221 | 5.51 | 341,084 | 4,708 | 5.48 | 185,576 | 2,235 | 4.89 | |||||||||||||||||
Net interest income | $ | 2,630 | $ | 2,376 | $ | 1,445 | ||||||||||||||||||||
Net interest margin(3) | 2.22 | % | 1.64 | % | 1.52 | % |
(1) Yields and costs are annualized.
(2) Includes loans held for sale and nonaccrual loans.
(3) Net interest margin represents net interest income divided by the average total interest earning assets.
(4) CCBX yield does not include the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements and originating & servicing CCBX loans. See reconciliation of the non-GAAP measures at the end of this earnings release for the impact of BaaS loan expense on CCBX loan yield.
(5) Net interest margin, net of BaaS loan expense includes the impact of BaaS loan expense. BaaS loan expense represents the amount paid or payable to partners for credit enhancements, fraud enhancements, originating & servicing CCBX loans. See reconciliation of the non-GAAP measures at the end of this earnings release.
(6) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(7) Intrabank assets and liabilities are consolidated for period calculations and presented as intrabank asset, net or intrabank liability, net in the table above.
COASTAL FINANCIAL CORPORATION QUARTERLY STATISTICS (Dollars in thousands, except share and per share data; unaudited) | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | |||||||||||||||
Income Statement Data: | |||||||||||||||||||
Interest and dividend income | $ | 90,472 | $ | 88,243 | $ | 88,331 | $ | 83,686 | $ | 70,111 | |||||||||
Interest expense | 29,536 | 28,586 | 26,102 | 21,336 | 15,620 | ||||||||||||||
Net interest income | 60,936 | 59,657 | 62,229 | 62,350 | 54,491 | ||||||||||||||
Provision for credit losses | 83,158 | 60,789 | 27,253 | 52,253 | 43,677 | ||||||||||||||
Net interest (expense)/ income after provision for credit losses | (22,222 | ) | (1,132 | ) | 34,976 | 10,097 | 10,794 | ||||||||||||
Noninterest income | 86,955 | 64,694 | 34,579 | 58,595 | 49,307 | ||||||||||||||
Noninterest expense | 56,018 | 51,703 | 56,501 | 51,910 | 44,663 | ||||||||||||||
Provision for income tax | 1,915 | 2,847 | 2,784 | 3,876 | 3,047 | ||||||||||||||
Net income | 6,800 | 9,012 | 10,270 | 12,906 | 12,391 | ||||||||||||||
As of and for the Three Month Period | |||||||||||||||||||
March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | |||||||||||||||
Balance Sheet Data: | |||||||||||||||||||
Cash and cash equivalents | $ | 515,128 | $ | 483,128 | $ | 474,946 | $ | 275,060 | $ | 393,916 | |||||||||
Investment securities | 50,090 | 150,364 | 141,489 | 110,730 | 101,704 | ||||||||||||||
Loans held for sale | 797 | — | — | 35,923 | 27,292 | ||||||||||||||
Loans receivable | 3,199,554 | 3,026,092 | 2,967,035 | 3,007,553 | 2,837,204 | ||||||||||||||
Allowance for credit losses | (139,258 | ) | (116,958 | ) | (101,085 | ) | (110,762 | ) | (89,123 | ) | |||||||||
Total assets | 3,865,258 | 3,753,366 | 3,678,265 | 3,535,283 | 3,451,033 | ||||||||||||||
Interest bearing deposits | 2,888,867 | 2,735,161 | 2,637,914 | 2,436,980 | 2,333,423 | ||||||||||||||
Noninterest bearing deposits | 574,112 | 625,202 | 651,786 | 725,592 | 761,800 | ||||||||||||||
Core deposits (1) | 3,447,864 | 3,342,004 | 3,269,082 | 3,137,747 | 3,068,162 | ||||||||||||||
Total deposits | 3,462,979 | 3,360,363 | 3,289,700 | 3,162,572 | 3,095,223 | ||||||||||||||
Total borrowings | 47,771 | 47,734 | 47,695 | 47,658 | 47,619 | ||||||||||||||
Total shareholders’ equity | 303,709 | 294,978 | 284,450 | 272,662 | 258,763 | ||||||||||||||
Share and Per Share Data (2): | |||||||||||||||||||
Earnings per share – basic | $ | 0.51 | $ | 0.68 | $ | 0.77 | $ | 0.97 | $ | 0.94 | |||||||||
Earnings per share – diluted | $ | 0.50 | $ | 0.66 | $ | 0.75 | $ | 0.95 | $ | 0.91 | |||||||||
Dividends per share | — | — | — | — | — | ||||||||||||||
Book value per share (3) | $ | 22.65 | $ | 22.17 | $ | 21.38 | $ | 20.50 | $ | 19.48 | |||||||||
Tangible book value per share (4) | $ | 22.65 | $ | 22.17 | $ | 21.38 | $ | 20.50 | $ | 19.48 | |||||||||
Weighted avg outstanding shares – basic | 13,340,997 | 13,286,828 | 13,285,974 | 13,275,640 | 13,196,960 | ||||||||||||||
Weighted avg outstanding shares – diluted | 13,676,917 | 13,676,513 | 13,675,833 | 13,597,763 | 13,609,491 | ||||||||||||||
Shares outstanding at end of period | 13,407,320 | 13,304,339 | 13,302,449 | 13,300,809 | 13,281,533 | ||||||||||||||
Stock options outstanding at end of period | 309,069 | 354,969 | 356,359 | 357,999 | 360,119 |
As of and for the Three Month Period | |||||||||||||||||||
March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | |||||||||||||||
Credit Quality Data: | |||||||||||||||||||
Nonperforming assets (5) to total assets | 1.42 | % | 1.43 | % | 1.18 | % | 0.95 | % | 0.91 | % | |||||||||
Nonperforming assets (5) to loans receivable and OREO | 1.71 | % | 1.78 | % | 1.47 | % | 1.12 | % | 1.11 | % | |||||||||
Nonperforming loans (5) to total loans receivable | 1.71 | % | 1.78 | % | 1.47 | % | 1.12 | % | 1.11 | % | |||||||||
Allowance for credit losses to nonperforming loans | 253.8 | % | 217.2 | % | 232.2 | % | 328.4 | % | 282.5 | % | |||||||||
Allowance for credit losses to total loans receivable | 4.35 | % | 3.86 | % | 3.41 | % | 3.68 | % | 3.14 | % | |||||||||
Gross charge-offs | $ | 58,994 | $ | 47,652 | $ | 37,879 | $ | 32,299 | $ | 34,167 | |||||||||
Gross recoveries | $ | 1,776 | $ | 2,781 | $ | 1,045 | $ | 1,340 | $ | 1,865 | |||||||||
Net charge-offs to average loans (6) | 7.34 | % | 5.92 | % | 4.77 | % | 4.19 | % | 4.84 | % | |||||||||
Capital Ratios: | |||||||||||||||||||
Company | |||||||||||||||||||
Tier 1 leverage capital | 8.24 | % | 8.10 | % | 8.03 | % | 8.16 | % | 8.29 | % | |||||||||
Common equity Tier 1 risk-based capital | 8.98 | % | 9.10 | % | 9.00 | % | 8.36 | % | 8.61 | % | |||||||||
Tier 1 risk-based capital | 9.08 | % | 9.20 | % | 9.11 | % | 8.47 | % | 8.73 | % | |||||||||
Total risk-based capital | 11.70 | % | 11.87 | % | 11.80 | % | 11.12 | % | 11.49 | % | |||||||||
Bank | |||||||||||||||||||
Tier 1 leverage capital | 9.19 | % | 9.06 | % | 8.99 | % | 9.16 | % | 9.35 | % | |||||||||
Common equity Tier 1 risk-based capital | 10.14 | % | 10.30 | % | 10.21 | % | 9.52 | % | 9.76 | % | |||||||||
Tier 1 risk-based capital | 10.14 | % | 10.30 | % | 10.21 | % | 9.52 | % | 9.76 | % | |||||||||
Total risk-based capital | 11.43 | % | 11.58 | % | 11.48 | % | 10.80 | % | 11.03 | % |
(1) Core deposits are defined as all deposits excluding brokered and all time deposits.
(2) Share and per share amounts are based on total actual or average common shares outstanding, as applicable.
(3) We calculate book value per share as total shareholders’ equity at the end of the relevant period divided by the outstanding number of our common shares at the end of each period.
(4) Tangible book value per share is a non-GAAP financial measure. We calculate tangible book value per share as total shareholders’ equity at the end of the relevant period, less goodwill and other intangible assets, divided by the outstanding number of our common shares at the end of each period. The most directly comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets as of any of the dates indicated. As a result, tangible book value per share is the same as book value per share as of each of the dates indicated.
(5) Nonperforming assets and nonperforming loans include loans 90+ days past due and accruing interest.
(6) Annualized calculations.
Non-GAAP Financial Measures
The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance.
However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for these adjusted measures, this presentation may not be comparable to other similarly titled adjusted measures reported by other companies.
A reconciliation showing the impact of certain non-GAAP unanticipated expenses on net income is included in the second paragraph of this earnings release.
The following non-GAAP measures are presented to illustrate the impact of BaaS loan expense on net loan income and yield on CCBX loans and the impact of BaaS loan expense on net interest income and net interest margin.
Net BaaS loan income divided by average CCBX loans is a non-GAAP measure that includes the impact BaaS loan expense on net BaaS loan income and the yield on CCBX loans. The most directly comparable GAAP measure is yield on CCBX loans.
Net interest income net of BaaS loan expense is a non-GAAP measure that includes the impact BaaS loan expense on net interest income. The most directly comparable GAAP measure is net interest income.
Net interest margin, net of BaaS loan expense is a non-GAAP measure that includes the impact of BaaS loan expense on net interest rate margin. The most directly comparable GAAP measure is net interest margin.
Reconciliations of the GAAP and non-GAAP measures are presented below.
As of and for the Three Months Ended | ||||||||||||
(dollars in thousands; unaudited) | March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||
Net BaaS loan income divided by average CCBX loans: | ||||||||||||
CCBX loan yield (GAAP)(1) | 17.34 | % | 17.36 | % | 16.09 | % | ||||||
Total average CCBX loans receivable | $ | 1,265,857 | $ | 1,196,137 | $ | 1,064,192 | ||||||
Interest and earned fee income on CCBX loans (GAAP) | 54,569 | 52,327 | 42,220 | |||||||||
BaaS loan expense | (24,837 | ) | (24,310 | ) | (17,554 | ) | ||||||
Net BaaS loan income | $ | 29,732 | $ | 28,017 | $ | 24,666 | ||||||
Net BaaS loan income divided by average CCBX loans (1) | 9.45 | % | 9.30 | % | 9.40 | % | ||||||
Net interest margin, net of BaaS loan expense: | ||||||||||||
CCBX interest margin (1) | 8.60 | % | 8.62 | % | 10.15 | % | ||||||
CCBX earning assets | 1,864,156 | 1,765,502 | 1,296,839 | |||||||||
Net interest income | 39,866 | 38,338 | 32,448 | |||||||||
Less: BaaS loan expense | (24,837 | ) | (24,310 | ) | (17,554 | ) | ||||||
Net interest income, net of BaaS loan expense | $ | 15,029 | $ | 14,028 | $ | 14,894 | ||||||
CCBX net interest margin, net of BaaS loan expense (1) | 3.24 | % | 3.15 | % | 4.66 | % |
(1) Annualized calculations for periods presented.
APPENDIX A -
As of March 31, 2024
Industry Concentration
We have a diversified loan portfolio, representing a wide variety of industries. Our major categories of loans are commercial real estate, consumer and other loans, residential real estate, commercial and industrial, and construction, land and land development loans. Together they represent
Commercial real estate loans represent the largest segment of our loans, comprising
The following table summarizes our loan commitment by industry for our commercial real estate portfolio as of March 31, 2024:
(dollars in thousands; unaudited) | Outstanding Balance | Available Loan Commitments | Total Outstanding Balance & Available Commitment | % of Total Loans (Outstanding Balance & Available Commitment) | Average Loan Balance | Number of Loans | |||||||||||
Apartments | $ | 355,965 | $ | 8,769 | $ | 364,734 | 6.7 | % | $ | 3,423 | 104 | ||||||
Hotel/Motel | 169,929 | 1,673 | 171,602 | 3.2 | 6,536 | 26 | |||||||||||
Convenience Store | 134,175 | 985 | 135,160 | 2.5 | 2,236 | 60 | |||||||||||
Mixed use | 95,425 | 3,403 | 98,828 | 1.8 | 1,097 | 87 | |||||||||||
Warehouse | 114,512 | 3,318 | 117,830 | 2.2 | 1,909 | 60 | |||||||||||
Office | 124,202 | 4,106 | 128,308 | 2.4 | 1,411 | 88 | |||||||||||
Retail | 105,188 | 668 | 105,856 | 2.0 | 1,002 | 105 | |||||||||||
Mini Storage | 69,655 | 22,385 | 92,040 | 1.7 | 3,166 | 22 | |||||||||||
Strip Mall | 44,430 | — | 44,430 | 0.8 | 6,347 | 7 | |||||||||||
Manufacturing | 35,655 | 1,512 | 37,167 | 0.7 | 1,150 | 31 | |||||||||||
Groups < | 93,353 | 4,882 | 98,235 | 1.8 | 1,138 | 82 | |||||||||||
Total | $ | 1,342,489 | $ | 51,701 | $ | 1,394,190 | 25.8 | % | $ | 1,998 | 672 |
Consumer loans comprise
The following table summarizes our loan commitment by industry for our consumer and other loan portfolio as of March 31, 2024:
(dollars in thousands; unaudited) | Outstanding Balance | Available Loan Commitments | Total Outstanding Balance & Available Commitment (1) | % of Total Loans (Outstanding Balance & Available Commitment) | Average Loan Balance | Number of Loans | |||||||||||
CCBX consumer loans | |||||||||||||||||
Credit cards | $ | 505,706 | $ | 932,956 | $ | 1,438,662 | 26.7 | % | $ | 1.6 | 314,989 | ||||||
Installment loans | 356,202 | 174 | 356,376 | 6.6 | 1.3 | 280,929 | |||||||||||
Lines of credit | 5,523 | 4,501 | 10,024 | 0.2 | 0.1 | 108,988 | |||||||||||
Other loans | 1,256 | — | 1,256 | 0.0 | 0.1 | 11,810 | |||||||||||
Community bank consumer loans | |||||||||||||||||
Installment loans | 1,173 | — | 1,173 | 0.0 | 61.7 | 19 | |||||||||||
Lines of credit | 191 | 517 | 708 | 0.0 | 5.2 | 37 | |||||||||||
Other loans | 83 | — | 83 | 0.0 | 0.3 | 315 | |||||||||||
Total | $ | 870,134 | $ | 938,148 | $ | 1,808,282 | 33.5 | % | $ | 1.2 | 717,087 |
(1) Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.
Residential real estate loans comprise
The following table summarizes our loan commitment by industry for our residential real estate loan portfolio as of March 31, 2024:
(dollars in thousands; unaudited) | Outstanding Balance | Available Loan Commitments | Total Outstanding Balance & Available Commitment (1) | % of Total Loans (Outstanding Balance & Available Commitment) | Average Loan Balance | Number of Loans | |||||||||||
CCBX residential real estate loans | |||||||||||||||||
Home equity line of credit | $ | 265,148 | $ | 434,672 | $ | 699,820 | 13.0 | % | $ | 26 | 10,232 | ||||||
Community bank residential real estate loans | |||||||||||||||||
Closed end, secured by first liens | 198,543 | 3,220 | 201,763 | 3.7 | 609 | 326 | |||||||||||
Home equity line of credit | 23,449 | 43,056 | 66,505 | 1.2 | 105 | 223 | |||||||||||
Closed end, second liens | 9,165 | 736 | 9,901 | 0.2 | 306 | 30 | |||||||||||
Total | $ | 496,305 | $ | 481,684 | $ | 977,989 | 18.1 | % | $ | 46 | 10,811 |
(1) Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.
Commercial and industrial loans comprise
The following table summarizes our loan commitment by industry for our commercial and industrial loan portfolio as of March 31, 2024:
(dollars in thousands; unaudited) | Outstanding Balance | Available Loan Commitments | Total Outstanding Balance & Available Commitment (1) | % of Total Loans (Outstanding Balance & Available Commitment) | Average Loan Balance | Number of Loans | |||||||||||
Capital Call Lines | $ | 135,671 | $ | 543,913 | $ | 679,584 | 12.6 | % | $ | 881 | 154 | ||||||
Retail | 44,565 | 6,036 | 50,601 | 0.9 | 17 | 2,685 | |||||||||||
Construction/Contractor Services | 29,370 | 30,305 | 59,675 | 1.1 | 150 | 196 | |||||||||||
Financial Institutions | 48,648 | — | 48,648 | 0.9 | 4,054 | 12 | |||||||||||
Medical / Dental / Other Care | 20,600 | 3,602 | 24,202 | 0.5 | 981 | 21 | |||||||||||
Manufacturing | 7,485 | 4,894 | 12,379 | 0.2 | 183 | 41 | |||||||||||
Groups < | 50,887 | 40,092 | 90,979 | 1.7 | 57 | 891 | |||||||||||
Total | $ | 337,226 | $ | 628,842 | $ | 966,068 | 17.9 | % | $ | 84 | 4,000 |
(1) Total exposure on CCBX loans is subject to CCBX partner/portfolio maximum limits.
Construction, land and land development loans comprise
The following table details our loan commitment for our construction, land and land development portfolio as of March 31, 2024:
(dollars in thousands; unaudited) | Outstanding Balance | Available Loan Commitments | Total Outstanding Balance & Available Commitment | % of Total Loans (Outstanding Balance & Available Commitment) | Average Loan Balance | Number of Loans | |||||||||||
Commercial construction | $ | 102,099 | $ | 73,803 | $ | 175,902 | 3.3 | % | $ | 6,381 | 16 | ||||||
Undeveloped land loans | 8,190 | 4,031 | 12,221 | 0.2 | 585 | 14 | |||||||||||
Residential construction | 28,751 | 8,652 | 37,403 | 0.7 | 2,054 | 14 | |||||||||||
Developed land loans | 14,307 | 1,849 | 16,156 | 0.3 | 715 | 20 | |||||||||||
Land development | 7,515 | 2,846 | 10,361 | 0.2 | 626 | 12 | |||||||||||
Total | $ | 160,862 | $ | 91,181 | $ | 252,043 | 4.7 | % | $ | 2,117 | 76 |
Exposure and risk in our construction, land and land development portfolio is lower in the current period compared to previous periods as demonstrated by the declining outstanding balance for the periods indicated in the following table:
Outstanding Balance as of | |||||||||||||||
(dollars in thousands; unaudited) | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | ||||||||||
Commercial construction | $ | 102,099 | $ | 81,489 | $ | 91,396 | $ | 78,079 | $ | 97,987 | |||||
Residential construction | 28,751 | 34,213 | 33,971 | 35,032 | 32,268 | ||||||||||
Undeveloped land loans | 8,190 | 7,890 | 8,310 | 42,530 | 41,951 | ||||||||||
Developed land loans | 14,307 | 20,515 | 21,369 | 18,735 | 19,130 | ||||||||||
Land development | 7,515 | 12,993 | 12,640 | 12,330 | 15,299 | ||||||||||
Total | $ | 160,862 | $ | 157,100 | $ | 167,686 | $ | 186,706 | $ | 206,635 |
Commitments to extend credit total
The following table presents outstanding commitments to extend credit as of March 31, 2024:
Consolidated | |||
(dollars in thousands; unaudited) | As of March 31, 2024 | ||
Commitments to extend credit: | |||
Commercial and industrial loans | $ | 84,929 | |
Commercial and industrial loans - capital call lines | 543,913 | ||
Construction – commercial real estate loans | 79,682 | ||
Construction – residential real estate loans | 11,499 | ||
Residential real estate loans | 481,684 | ||
Commercial real estate loans | 51,701 | ||
Credit cards | 932,956 | ||
Consumer and other loans | 5,192 | ||
Total commitments to extend credit | $ | 2,191,556 |
We have individual CCBX partner portfolio limits with our each of our partners to manage loan concentration risk, liquidity risk, and counter-party partner risk. For example, as of March 31, 2024, capital call lines outstanding balance totaled
See the table below for CCBX portfolio maximums and related available commitments:
CCBX | ||||||||||||||
(dollars in thousands; unaudited) | Balance | Percent of CCBX loans receivable | Available Commitments (1) | Maximum Portfolio Size | Cash Reserve/Pledge Account Amount (2) | |||||||||
Commercial and industrial loans: | ||||||||||||||
Capital call lines | $ | 135,671 | 10.3 | % | $ | 543,913 | $ | 350,000 | $ | — | ||||
All other commercial & industrial loans | 47,160 | 3.6 | 12,210 | 294,132 | 616 | |||||||||
Real estate loans: | ||||||||||||||
Home equity lines of credit (3) | 265,148 | 20.1 | 434,672 | 375,000 | 31,071 | |||||||||
Consumer and other loans: | ||||||||||||||
Credit cards - cash secured | 78 | — | — | |||||||||||
Credit cards - unsecured | 505,628 | 932,956 | 24,143 | |||||||||||
Credit cards - total | 505,706 | 38.4 | 932,956 | 806,965 | 24,143 | |||||||||
Installment loans - cash secured | 69,105 | — | — | |||||||||||
Installment loans - unsecured | 287,097 | 174 | 1,395 | |||||||||||
Installment loans - total | 356,202 | 27.1 | 174 | 989,388 | 1,395 | |||||||||
Other consumer and other loans | 6,779 | 0.5 | 4,501 | 689,515 | 1,053 | |||||||||
Gross CCBX loans receivable | 1,316,666 | 100.0 | % | 1,928,426 | $ | 3,505,000 | $ | 58,278 | ||||||
Net deferred origination fees | (394 | ) | ||||||||||||
Loans receivable | $ | 1,316,272 |
(1) Remaining commitment available, net of outstanding balance.
(2) Balances are as of April 5, 2024.
(3) These home equity lines of credit are secured by residential real estate and are accessed by using a credit card, but are classified as 1-4 family residential properties per regulatory guidelines.
APPENDIX B -
As of March 31, 2024
CCBX – BaaS Reporting Information
During the quarter ended March 31, 2024,
For CCBX partner loans the Bank records contractual interest earned from the borrower on loans in interest income, adjusted for origination costs which are paid or payable to the CCBX partner. BaaS loan expense represents the amount paid or payable to partners for credit and fraud enhancements and originating & servicing CCBX loans. To determine net revenue (Net BaaS loan income) earned from CCBX loan relationships, the Bank takes BaaS loan interest income and deducts BaaS loan expense to arrive at Net BaaS loan income (A reconciliation of the non-GAAP measures are set forth in the preceding section of this earnings release.) which can be compared to interest income on the Company’s community bank loans.
The following table illustrates how CCBX partner loan income and expenses are recorded in the financial statements:
Loan income and related loan expense | Three Months Ended | |||||||||||
(dollars in thousands; unaudited) | March 31, 2024 | December 31, 2023 | March 31, 2023 | |||||||||
Yield on loans (1) | 17.34 | % | 17.36 | % | 16.09 | % | ||||||
BaaS loan interest income | $ | 54,569 | $ | 52,327 | $ | 42,220 | ||||||
Less: BaaS loan expense | 24,837 | 24,310 | 17,554 | |||||||||
Net BaaS loan income (2) | 29,732 | 28,017 | 24,666 | |||||||||
Net BaaS loan income divided by average BaaS loans (1)(2) | 9.45 | % | 9.30 | % | 9.40 | % |
(1) Annualized calculation for quarterly periods shown.
(2) A reconciliation of the non-GAAP measures are set forth in the preceding section of this earnings release.
An increase in CCBX loans receivable resulted in increased interest income on CCBX loans during the quarter ended March 31, 2024 compared to the quarter ended December 31, 2023. The increase in CCBX loans receivable was primarily due to growth in the CCBX loan portfolio as part of our strategy to optimize the CCBX loan portfolio and strengthen our balance sheet through originating higher quality new loans and enhanced credit standards. Increased interest rates and growth in CCBX loans and deposits has resulted in increases in interest income and expense for the quarter ended March 31, 2024 compared to the quarter ended March 31, 2023.
The following tables are a summary of the interest components, direct fees, and expenses of BaaS for the periods indicated and are not inclusive of all income and expense related to BaaS.
Interest income | Three Months Ended | ||||||||
(dollars in thousands; unaudited) | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
Loan interest income | $ | 54,569 | $ | 52,327 | $ | 42,220 | |||
Total BaaS interest income | $ | 54,569 | $ | 52,327 | $ | 42,220 |
Interest expense | Three Months Ended | ||||||||
(dollars in thousands; unaudited) | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
BaaS interest expense | $ | 22,854 | $ | 21,826 | $ | 12,424 | |||
Total BaaS interest expense | $ | 22,854 | $ | 21,826 | $ | 12,424 |
BaaS income | Three Months Ended | ||||||||
(dollars in thousands; unaudited) | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
BaaS program income: | |||||||||
Servicing and other BaaS fees | $ | 1,131 | $ | 1,015 | $ | 948 | |||
Transaction fees | 1,122 | 1,006 | 917 | ||||||
Interchange fees | 1,539 | 1,272 | 789 | ||||||
Reimbursement of expenses | 1,033 | 1,076 | 921 | ||||||
BaaS program income | 4,825 | 4,369 | 3,575 | ||||||
BaaS indemnification income: | |||||||||
BaaS credit enhancements | 79,808 | 58,449 | 42,362 | ||||||
BaaS fraud enhancements | 923 | 779 | 1,999 | ||||||
BaaS indemnification income | 80,731 | 59,228 | 44,361 | ||||||
Total noninterest BaaS income | $ | 85,556 | $ | 63,597 | $ | 47,936 |
BaaS loan and fraud expense: | Three Months Ended | ||||||||
(dollars in thousands; unaudited) | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||
BaaS loan expense | $ | 24,837 | $ | 24,310 | $ | 17,554 | |||
BaaS fraud expense | 923 | 779 | 1,999 | ||||||
Total BaaS loan and fraud expense | $ | 25,760 | $ | 25,089 | $ | 19,553 |
FAQ
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